If you own a home, you’re sitting on a wealth of equity. You can put that equity to good use, and make money with it

Why Now is an Ideal Time to Use Your Home’s Equity to Build Wealth

While many financial gurus look grimly toward the probable interest rate increases, it is still a good time to make some financial moves. Rates are no longer exceptionally low, but the flip side of that development is falling property prices. So, even though you may have a bit more interest on your loan, starting with a lower loan amount cushions the rate increase.

Owner-occupiers are in an excellent position to use the equity they have built in their home to create wealth in the future. The present situation lends itself to investing and locking in the current rates before they edge higher while considering some investment opportunities that are right outside your door.


What is Home Equity?

The term is a buzzword in the financial and housing sectors, but what is home equity? Simply put, home equity is the difference between the present value of your property and the amount you still owe.

For example, if your home’s value is $600,000 and you have a loan of $400,000, you have $200,000 in equity. Equity is a financial asset that you can use for other opportunities.

The four most common uses for home equity funds are:

  1. Moving
  2. Renovating
  3. Investing
  4. Property Investments


Choosing the Best Use for Your Home Equity Money

Consider your options before deciding the best way to use your home equity. Some opportunities will make more sense for you than others.

  • For many homeowners, moving is not in their plans for the immediate future.
  • Although home renovations are a great way to customise or repair your home, not all renovations will pay off as well as you hoped when it is time to sell.
  • Using your equity to invest in other assets is a typical use of the money. Before you do this, make sure you are working with an experienced financial advisor who understands the markets and can assess your risks.
  • Purchasing an investment property is another popular use for the equity in your home and to build wealth.


Is Property Investing for Me?

Property investing is a serious business decision, and deciding to invest just because you have some available equity is likely not in your best interest. However, if creating or adding to a portfolio is a move you would like to make, this could be a great time to learn more.

Property is a historically lucrative area for investing, but it is important to remember there are no guarantees in any investment. As Australians adjust to the interest rate changes, some homeowners are seeing the first interest rate increases (and potential loan repayment amount increases) in their lifetime. However, the shift can present opportunities for those with funds to invest. The overall market shift can put property within reach of investors who were unable to compete against those with more capital.

To get the ball rolling, arrange to speak with a financial expert familiar with parlaying home equity into property investing. It would be best if you also planned for a property valuation to make sure you have the most accurate numbers to calculate your home equity.

Work with an experienced financial advisor who understands the markets and can assess your risks.


Where to Invest

For owners with equity and a desire to invest, this is a good time to take a look at property investment, particularly in Western Australia. Rentals are in high demand with just 0.6 per cent vacancies. The state’s reopening and a steady flow of jobs promise to increase the demand for rental units. Investing in creating homes, whether you plan to hold the property and rent houses or build and sell newly constructed homes, seems to be a wise choice.

This is an excellent time to invest in Western Australia as the state seems poised to exceed recent growth expectations. There are several reasons to consider property investment in WA. The ease of commuting from Perth’s suburbs to the Central Business District, as well as a large number of family-friendly green spaces and quality schools, all help draw people from all over the country to the west. It is easy to immerse yourself in the vast and diverse beauty of the state.

Aside from gleaming cities, there are kilometres of soft sand beaches that frame the Indian Ocean, rugged caves, hiking and biking trails, and a fantastic collection of vineyards and wineries in the Margaret River Region. The state’s grandeur rivals any other area in the country.

Even though the market is showing signs of more changes on the horizon, investing in rental property is still a wise decision for those with equity in their homes. If you would like one-on-one consultation with one of our financial experts or if you have a few questions, please reach out to us at Quantum Finance. Our team will leverage their years of experience to give you the guidance you need to make decisions moving forward.

** Please Note**
The material presented here is for informational use only. It is not to be considered binding financial advice and should not be used to take the place of a consultation with a finance expert.

Gavin Harrigan

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With over 18 years in the finance industry, Gavin's wealth of knowledge relating to home loans is matched by few in Australia. This knowledge is reflected in his dozens of awards, including being inducted into the Plan Australia Hall of Fame. His qualifications include a Bachelor of Commerce from Curtin University for Applied Finance and Commercial Law and a Diploma of Finance and Mortgage Broking Management from AAMC Training Group.

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